‘Project Credit Despair’ Snares 20 ‘Credit Repair’ Scammers
February 2, 2006
Defendants Allegedly Lured Consumers With False Claims
The Federal Trade Commission, U.S. Postal Inspection Service (USPIS), and eight state law enforcement agencies today announced a crackdown on 20 operations that deceptively claim they can remove negative information from consumers’ credit reports – even if that information is accurate and timely.
“Credit repair schemes are a big problem for consumers,” said Eileen Harrington, Deputy Director of the FTC’s Bureau of Consumer Protection. “Credit repair promoters generally charge hundreds of dollars, but don’t deliver on their claims. The fact is, they can’t. No one can legally remove accurate and timely information from your credit report.”
The FTC began coordinating “Project Credit Despair” last year in response to thousands of consumer complaints, which it shared with the USPIS, the State of Louisiana Office of Financial Institutions, and other state law enforcement agencies. The cases involved companies throughout the nation, many of which promised to remove accurate and timely information from consumers’ credit reports, and typically charged hundreds of dollars in advance for the service.
According to the FTC, Bad Credit B Gone, LLC and its principal, Joseph A. Graziola III, made promises such as “the credit you always dreamed of!” and “If we fail to remove any negative credit from your reports, we’ll give you a refund plus $100.” Referring to “charge-offs, collections, tax liens, bankruptcies, repossessions, student loans, child support, late payments, and judgments,” they claimed, “On average, 80 percent of the derogatory information is deleted off your credit report within . . . three months.” The Philadelphia-based company charged $500 per individual and $700 per couple for its services, half of which was due up-front.
The FTC charged Bad Credit B Gone with violating the FTC Act by making false or misleading statements, such as claiming they can improve most consumers’ credit reports substantially and permanently by removing negative information that is accurate and not obsolete. The defendants also allegedly violated the Credit Repair Organizations Act (CROA) by requiring advance payment for credit repair services and by making false or misleading statements. The FTC is seeking to bar them permanently from further violations, to require them to return money to consumers, and to give up their ill-gotten gains.
“We have two goals with this announcement,” Harrington said. “One is very specific. It is to stop Bad Credit B Gone’s deceptive practices, and force them to return their ill-gotten gains to consumers. The other is broad. It is to put other credit repair firms on notice that we are on the beat, and it is to alert consumers that there is absolutely no reason to pay for credit repair – ever. Despite their claims, there is nothing that any credit repair firm can do for you for a fee that you cannot do for yourself at little or no cost.”
In another FTC action involving credit repair:
- In the matter of Cornerstone Wealth Corporation of Dallas, Texas, doing business as Credit Financial Services, and its principal, John Atchley, Jr., the FTC has asked the court to issue a contempt citation for alleged violations of a previous court order.
Law enforcement initiatives also were taken by the Office of the Attorney General for the State of Tennessee, Office of the Attorney General for the State of Ohio, Office of the Attorney General for the State of California, Office of the Attorney General for the State of Arkansas, Office of the Attorney General for the State of Illinois, Office of the Attorney General for the State of Florida, Office of the Attorney General for the Commonwealth of Kentucky, and the State of Louisiana Office of Financial Institutions.
Court Closes Book on Credit Repair Ripoff
June 12, 2006
A federal judge has ruled that a bogus credit repair company and its owner violated the law by making false and misleading claims, and billing in advance for its services, and has ordered them to pay more than $322,000. This action was a result of “Project Credit Despair,” a crackdown on 20 operations that deceptively claimed they could remove negative information from consumers’ credit reports – even if that information was accurate and timely.
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In response to thousands of consumer complaints, the FTC began coordinating the crackdown last year with the U.S. Postal Inspection Service, the State of Louisiana Office of Financial Institutions, and other state law enforcement agencies. The actions involved operations throughout the nation, many of which promised to remove accurate and timely information from consumers’ credit reports, and typically charged hundreds of dollars in advance for the service.
The FTC charged Bad Credit B Gone and Joseph A. Graziola III with violating the FTC Act by making false and misleading statements, including claims that they could substantially improve consumers’ credit reports by permanently removing negative information that was accurate and not obsolete. They also violated the Credit Repair Organizations Act (CROA) by requiring advance payment for their credit repair services.
Under the court’s ruling, the defendants are permanently prohibited from misrepresenting that they can improve substantially most consumers’ credit reports by permanently removing negative information from the reports, even when the information is accurate and not obsolete; misrepresenting any fact material to a person’s decision to purchase credit repair services from them; misrepresenting any material fact regarding anything sold or offered for sale by them; and assisting others who violate these provisions. They also are permanently prohibited from violating the CROA, including charging or receiving payment for credit repair services before they have been performed, and making deceptive statements to induce consumers to purchase credit repair services. The defendants also must pay $322,047.38 in consumer redress. In addition, they are prohibited from collecting, or trying to collect, payment from their customers for credit repair services, or disclosing personal information about them.
The Commission vote to authorize staff to file the complaint against Bad Credit B Gone, LLC, was 4-0 on December 1, 2005, when there was a vacant seat on the Commission.
The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago, which granted a default judgment and order for permanent injunction and monetary relief.